Exposure of the Accounting Profession to Increasing Liability

|Francis Marion University | |Exposure of the Accounting Profession To Increasing Liability | |Response of the Profession | | | | Kim Taylor | |4/30/2010†¦show more content†¦The purpose of this endeavor was to examine the current status of the accounting profession, envision a more favorable future situation, and then determine the necessary strategy to follow in attaining this. The consensus of the committee was that the expectations from audits were too high. They went on to elaborate on the lack of precision and exactness of financial statements and that the public was demanding a degree of certainty in their audits that could not be achieved. This has historically been labeled the â€Å"expectations gap† They concluded that although auditors were not totally responsible for the scandals in 2000 and beyond, â€Å"all too many independent auditors lost their autonomy and judgment- and ended by blurring the line between right and wrong.† They described the audit as becoming a â€Å"commodity with little intrinsic value,† used to facilitate management’s objective of releasing misleading financial statements. , and concluded that accounting self-regulation had failed in these instances. They also expressed concern about auditing practices of the Big Four. They said that firms such as these fail to effectively use their resources since experienced auditors often are not on the job site where they are most needed to detectShow MoreRelatedHistorical Development Of Fair Value Measurement1400 Words   |  6 Pagesentities should determine the fair value of financial instruments for reporting purposes. 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Tackett Professor, Youngstown State University, Department of Accounting and Finance, Youngstown, Ohio, USA Gregory A. Claypool Associate Professor, Youngstown State University, Department of Accounting and Finance, Youngstown, Ohio, USA Keywords Expectation gap, Audit failure, Audit futures, Market-based measures Introduction Read MoreRatio Analysis Financial Accounting3622 Words   |  15 PagesFinancial Accounting and Reporting – Ratio Analysis The following five-year summary relates to VKM Ltd, and is based on financial statements prepared under the historical cost convention. Financial Ratios 2006 2005 2004 2003 2002 Profitability Margin Trading Profit Revenue % 7.8 7.5 7.0 7.2 7.3 Return on Assets Trading Profit Net Operating Assets % 16.3 17.6 16.2 18.2 18.3 Interest Dividend Cover Interest cover Trading Profit Net Finance Charges times 2.9 4.8 5.1 6.5 3.6 DividendRead MoreFred Stern Company, Inc.2290 Words   |  10 Pagesoperations. In 1924, Fred Stern Co. approached a finance company named Ultramares Corporation for a loan of $100,000. Before accepting the terms, Ultramares Corp. requested an audited balance sheet to serve as support for the loan. A well-respected accounting firm named Touche, Niven Co. had provided assurance for their statement a few months earlier, which allowed the deal to go through. The following year, in January 1925, Fred Stern Co. filed for bankruptcy and Ultramares Corporation found itselfRead MoreDhjsj14297 Words   |  58 Pagesis unclear, however, is whether auditing was sufficiently â€Å"broken† in the first place to warrant the radical reforms and changes effected by the Sarbanes-Oxley Act (SOX). Despite a relatively small number of high profile corporate failures and accounting scandals such as Enron and WorldCom, the number of demonstrated audit failures as evidenced by successful li tigation or SEC sanctions approaches an annual failure rate of close to zero. In addition, our interpretation of the academic research suggests